Motorcar Parts of America, Inc.

Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Motorcar Parts of America third quarter 2024 webcast and conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one button. Thank you. Gary Mayer, Vice President of Communications and Investor Relations. You may begin your conference.

Thanks. Thanks, Rob. Thanks, everyone, for joining us for our call. Before we begin, and I turn the call over to Selin Jaffe, Chairman, President and Chief Executive Officer, and David Lee, the company's Chief Financial Officer. I'd like to remind everyone of the safe harbor statement included in today's press release. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements, including statements made during today's conference call. Such forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance that future developments affecting the company will be those anticipated by motor car parts of America. Actual results may differ from those projected in the forward-looking statement. These forward-looking statements involve significant risks and uncertainties, some of which are beyond the control of the company and are subject to change based upon various factors. In particular, expectations that anticipated future growth and opportunities with customers may not be achieved. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business, I refer you to the various filings with the Securities and Exchange Commission. With that, I'd like to begin the call and turn it over to Selva.

Thank you, Gary. I appreciate everyone joining us today. We are encouraged by our operating results for the quarter, including strong sales performance, increased gross margins, increased EBITDA, and significant positive cash flow, and a revolver pay down of $50 million to $102.8 million of net debt. While some of this cash flow resulted from deferred collection catch-up in the quarter, for the nine months we generated $48.4 million in positive cash. I might add that these results were particularly impressive considering the industry softness in November and December. Recent extreme weather conditions throughout the country should help bolster this industry sales toughness in future quarters. We are also pleased that gross profit for the quarter and nine months increased substantially. Gross margins continue to improve and benefit from better operating efficiencies as anticipated, particularly from increased overhead absorption with higher sales and production in newer product categories. I should also add that price increases in effect but not yet realized will contribute an additional $10 million in annualized sales and gross profit and EBITDA. We remain focused on three key initiatives, sales, profitability, and neutralizing working capital. We are confident that our sales and profitability will grow organically and through market share gains in all of our product lines. Increased profitability along with our working capital initiatives will further enhance cash flow generation. With regard to working capital, we continue to focus on the balance sheet, including extending vendor payment terms. This initiative is being supported by the launch of our vendor finance program offered to our suppliers. This enables us to extend our payment terms while facilitating a program for our suppliers to have early access to capital. We expect to increase the number of days outstanding for accounts payable, which will result in additional cash generation. While in its early stages, this program is progressing nicely and will gain increased traction in the months ahead. I should note that the effects of this program are not yet reflected in our results and will provide additional upside to cash flow generation. From a strategic standpoint, we are continuing to leverage our strengths, including great products manufactured at state-of-the-art facilities, solid customer relationships, industry-leading SKU coverage, not to mention our value-added merchandising and marketing support. We are continuing to expand hard part sales in Mexico, with opportunities to further expand in other Latin American countries with multiple product lines, as our customers experience increased demand for aftermarket parts. The rate of growth is exciting, and we are well-positioned to utilize our footprint to meet the growing demand for our non-discretionary aftermarket parts. Our test solutions and diagnostic equipment, in particular, our industry-leading JVT1 benchtop testers for alternator starters used by major automotive retailers and professional installers, continues to grow significantly. We believe the market opportunity for additional growth in the U.S. is approximately $110 million, and we are well on our way. Favorable industry dynamics continue to bode well for the company, and we're extremely well-positioned for sustainable top and bottom line growth in our hard parts business, as well as the testing solutions. Let me take a moment to further discuss our near-term initiatives to support our long-term growth and profitability plan. Our near-term plan is in motion as we expect to achieve significant growth in all of our product lines, including our quality-built brand that continues to gain significant market share within the professional market. This includes our most recent additions to our portfolio of brake calipers, pads, and rotors. Operating efficiency improvements are continuing as volume increases. Overall, this growth is supported by investments, especially the company's global footprint expansion in Mexico, backed by a well-trained and seasoned team of professional employees. Also, we have expanded our Malaysian operation to add capacity and additional capabilities to support customers. We recently opened a new state-of-the-art wheel hub manufacturing facility in Malaysia, enabling us to ship product directly to our customers. Congratulations to our spectacular operating team, especially to those in Singapore and Malaysia. Our business growth is strategic, and we are focused on generating solid cash flow and profitability. The strong cash generation will enable us the flexibility to further pay down debt and pursue other related opportunities to enhance shareholder value. In conclusion, non-discretionary aftermarket parts for the internal combustion engine market will be here for decades and have to look supported by recently updated industry data showing that the average age of vehicle is 12.5 years. It is worth highlighting that the population of vehicles operating with internal combustion engines versus EVs represents approximately 98.3% of all vehicles on the road. One of our key competitive advantages is our ability to offer a broad range of applications for all makes and models. We remain focused on newer model applications and our ability to meet expected demand as these vehicles enter the replacement market. As you probably know, the emerging electric vehicle market is still quite small relative to the overall car park population. Recent news articles regarding EV range, particularly in cold regions in the country, contribute to consumer hesitancy to plug in. But as technology improves and these types of issues are addressed, we expect to continue to benefit in both markets with product functionality and applications across both EV and ICE applications. While I am disappointed in the tax valuation allowance, I want to emphasize that it has no bearing on any operating metrics, cash flow, tax liability, or any economics of the company. It is simply required by GAAP. Finally, we recently announced change to our sales team. Jamie Cook has been promoted to Senior Vice President of Sales and Marketing. She is succeeding Rick Michalski, who will transition to a new role as Senior Vice President of Business Development. Jamie and Rick have worked closely together at MPA for many years. Jamie is recognized throughout the automotive aftermarket. She is an exceptional leader, with the added benefit of being a role model for women seeking to advance in the industry. Rick will remain an important member of our team in his new role, helping to drive demand for all of our products, both from existing and new retail and professional customers. I'll now turn the call over to David to review our results in greater detail.